This is the second post in a two-part series on the Department of Education’s Income-Based Repayment (IBR) program for federally backed student loans. Under an IBR plan New Yorkers and other Americans with eligible loans can make lower monthly payments to the government based on their disposable income if their income is too low to make the regular payments and maintain a reasonable standard of living.

(6) How is the monthly payment calculated? It takes into account two factors: your gross income and family size. The monthly payment rate is your gross income minus the Department of Health and Human Services’ Poverty Guideline for your state multiplied by 1.5. From that number, the monthly payment rate is 15% of that divided into 12 months. If a person’s family or income changes, so too will the monthly payments.

(7) The monthly payments will never be greater than what they would be if your loans were not in the IBR repayment plan.

(8) There are a few distinct advantages to IBR:

a. Obviously, it decreases monthly loan payments, but that also means it will lengthen repayment periods and accrue additional interest

b. The federal government will pay accrued interest for the first three years a person is on an IBR plan if the loans are Subsidized Stafford Loans.

c. For debtors working full-time in public service jobs for ten consecutive years, the government forgives the full balance of their loans if they concurrently enroll in the Public Service Loan Forgiveness Program (also called Income-Contingent Repayment (ICR)). However, ICR is only available to those who have federal Direct Loans not older FFEL loans.

d. By far IBR’s greatest benefit is it forgives the full remaining balance, principal and interest, after 25 years of payment regardless of occupation. On the downside, the forgiveness counts as income for income tax purposes, but people may qualify for the “insolvency exception” if the amount is very large. Qualifying for loan forgiveness requires a handful of other requirements, such as making payments on time and reporting income and family changes to the Department of Education.

(9) The biggest drawback to IBR is that it does not apply to private student loans.

(10) Prospective students in professional education may be able to fully finance their educations with Direct Loans and Grad PLUS loans while remaining eligible for IBR, minimizing the cost of an expensive professional education.

Many student debtors are unaware of IBR, but consulting with an experienced New York bankruptcy attorney can help you determine eligibility and help you get control over your other debts.